ABOUT LDSG
Leeds Group has been established for more than a century, the Group has been mainly engaged in textile processing, specialising in fabric printing and yarn dyeing, and by 1996 had manufacturing operations in UK, Holland and Italy. In recent years, the European textile manufacturing industry has contracted, with an ever-increasing proportion of European textile consumption being sourced from the low wage economies of the Far East. In response, Leeds Group has ceased all manufacturing activities and is now focused on the import and sale throughout the world of fabric imported from the Far East. LDSG is essentially a holding company for Hemmers Itex whose key operations focus on the German market.
LDSG had been in a pretty poor state for the last decade until the past three years. Management have stabilised and diversified the business since 2011, the team includes:
Jan G Holmstrom (Non-Executive Chairman) represents Peter Gyllenhammar who own just under 25% of the company. He is also Chairman of Densitron Technologies plc and non-executive director of Pittards plc and Johnson & Starley Limited. Jan is also managing director of Browallia AB, a Swedish investment company owned by Gyllenhammar. Jan joined the Board of Leeds Group in November 2011 and was appointed Chairman in October 2014.
Johan Claesson- Johan has been a major shareholder in Leeds Group since 1999, he now owns just under 29% of the company. He is Chairman of Claesson & Anderzén, a private property company.
Interestingly the only other institutional shareholder is Sunningdale Investments with 7% of the company, purchased in tranches over the past few months. Sunningdale is the investment vehicle for Jersey based Sir David Kirch. Kirch is a famed philanthropist and a sharp investor who has made large amounts of money from London property.
It's no coincidence that the company began to stabilise after Gyllenhammar brought Holmstrom to the board. Holmstrom is backed by Jorg Hemmers who manages the Hemmers ITX and ChinohTex, the Chinese subsidary. In recent interims Hemmers completed the purchase of 50% of the issued share capital of Stoff-Ideen-KMR (KMR) at a cost of €500,000 (approximately £400,000). KMR is a privately owned chain of 14 shops retailing fabric and haberdashery. In the calendar year 2013 KMR achieved sales of €6,181,000 and pre-tax profit of €392,000. Management stated that they were looking to add to this recent investment. The five year results below show Holmstrom and Hemmers progress. LDSG have nearly tripled the amount of free cash since 2012. A sustained recovery should continue with a management team that have a solid approach to capital allocation.
Leeds Group has been established for more than a century, the Group has been mainly engaged in textile processing, specialising in fabric printing and yarn dyeing, and by 1996 had manufacturing operations in UK, Holland and Italy. In recent years, the European textile manufacturing industry has contracted, with an ever-increasing proportion of European textile consumption being sourced from the low wage economies of the Far East. In response, Leeds Group has ceased all manufacturing activities and is now focused on the import and sale throughout the world of fabric imported from the Far East. LDSG is essentially a holding company for Hemmers Itex whose key operations focus on the German market.
LDSG had been in a pretty poor state for the last decade until the past three years. Management have stabilised and diversified the business since 2011, the team includes:
Jan G Holmstrom (Non-Executive Chairman) represents Peter Gyllenhammar who own just under 25% of the company. He is also Chairman of Densitron Technologies plc and non-executive director of Pittards plc and Johnson & Starley Limited. Jan is also managing director of Browallia AB, a Swedish investment company owned by Gyllenhammar. Jan joined the Board of Leeds Group in November 2011 and was appointed Chairman in October 2014.
Johan Claesson- Johan has been a major shareholder in Leeds Group since 1999, he now owns just under 29% of the company. He is Chairman of Claesson & Anderzén, a private property company.
Interestingly the only other institutional shareholder is Sunningdale Investments with 7% of the company, purchased in tranches over the past few months. Sunningdale is the investment vehicle for Jersey based Sir David Kirch. Kirch is a famed philanthropist and a sharp investor who has made large amounts of money from London property.
It's no coincidence that the company began to stabilise after Gyllenhammar brought Holmstrom to the board. Holmstrom is backed by Jorg Hemmers who manages the Hemmers ITX and ChinohTex, the Chinese subsidary. In recent interims Hemmers completed the purchase of 50% of the issued share capital of Stoff-Ideen-KMR (KMR) at a cost of €500,000 (approximately £400,000). KMR is a privately owned chain of 14 shops retailing fabric and haberdashery. In the calendar year 2013 KMR achieved sales of €6,181,000 and pre-tax profit of €392,000. Management stated that they were looking to add to this recent investment. The five year results below show Holmstrom and Hemmers progress. LDSG have nearly tripled the amount of free cash since 2012. A sustained recovery should continue with a management team that have a solid approach to capital allocation.
The textile industry is low margin and highly competitive but I believe LDSG has an attractive niche business. I believe management is strong with Holmstrom a proven investment manager with a remit to protect Gyllenhammars investment. Hemmers operational experience and knowledge of the industry is also an obvious asset. I'm inclined to agree with management that forex effects disguise the true progress of the company. Post turnaround LDSG is financially stable, committed to growth by acquisition and at the current price cheap on an EV/EBIT of 4.96.
Disclosure: Long LDSG with a 2% portfolio holding
Disclosure: Long LDSG with a 2% portfolio holding